At CCIA’s Washington Caucus:

Senator Hatch Considers the Prospects of a Compromise Encryption Bill;

Congressman Dingell to Draft an Amendment to Slow the Spectrum Auction Process

(Washington, DC) — Senate Judiciary Chairman Orrin Hatch (R-UT)wants a resolution to the debate over encryption and export controls. In remarks this week to the Computer & Communications Industry Association’s Washington Caucus, Hatch said he may sponsor a bill which could serve as a compromise on the encryption issue.

“I am considering crafting legislation that closely tracks the Leahy bill with respect to establishing a framework for a voluntary key recovery infrastructure, but which also allows for a carefully measured relaxation of encryption export standards,” Hatch said

“For too long this debate has drifted aimlessly,” he continued. “I’m committed to legislation that provides an opportunity to U.S. industry to remain competitive worldwide by a measured relaxation of export controls and [one] which provides a process that allows law enforcement to gain access to decryption keys under appropriate circumstance.”

Hatch suggested setting an encryption export standard — one which is adjustable as technology evolves. Those who want to export encryption products which exceed the level of the standard, he explained, would be encouraged to implement a key recovery feature into the product.

“While I have no illusions that such a proposal would be construed as a perfect proposal by either side of this debate,” Hatch continued, “I do believe it may strike a fair compromise which will result in a market-driven development of key recovery.

“It is my firm belief that a government-imposed mandatory key recovery scheme is destined to have a direct adverse impact upon American business, while failing to confer any meaningful help to law enforcement. Such an infrastructure will never develop under such circumstance.

“I am convinced that the development of a global key recovery framework is a necessary and inevitable development in the best interest of not only law enforcement but of international commerce as well. While encouraging the implementation of such an infrastructure, it is our responsibility to ensure that U.S. business remains competitive in an increasingly worldwide market.

“Should this Congress fail to take action on this issue now, I’m fearful that the result will be that U.S. companies will move production offshore and foreign business interests will engage in greater proliferation of robust encryption in an effort to wrestle control of the international hardware and software markets from U.S. business. The end result of this will be greater proliferation of encryption abroad, posing a direct threat to our national security and to domestic and international law enforcement. And that is a lose-lose situation.”

CCIA welcomes the Senator’s efforts towards reaching an acceptable compromise on the encryption debate and we greatly appreciate his wisdom. However, we believe that any encryption policy which does not allow U.S. companies to be competitive with an overseas business which may offer stronger encryption — without a key recovery component — is doomed to failure. We applaud Senator Hatch for his broad understanding of the breadth of this issue and hope that he will afford CCIA and others the opportunity to work with him and other members of the Judiciary Committee toward a resolution which is not detrimental to U.S. business nor to public and private computer systems.

Meanwhile, Congressman John Dingell (D-MI) informed CCIA members of his plans to introduce an amendment to remove “all arbitrary [spectrum] auction timetables and let the FCC determine what auction dates will best serve the public interest.” Calling spectrum a scarce and invaluable public resource which should not be squandered by “some short-sighted budget gimmickry,” Dingell said “my amendment will contain two important safeguards to make sure that public assets are not sold at fire sale prices in the future. First it will require the FCC to establish minimum bids for auctions…to make sure that the market is ripe for an auction. The second safeguard will allow the FCC to nullify an auction if it fails to meet minimum expectations. If an auction occurred like the one on April 15 that raised less than one percent of its intended objective, the Commission could go back to the drawing board and try the business again later.

“Congress should not force the FCC to take actions which anyone with a passing appreciation of telecommunications policies knows are either counterproductive or just plain stupid. The fire sale that occurred on April 15 should never be permitted to happen again. It ill-serves both responsible companies and taxpayers alike, when [bidders] can walk away with spectrum simply because Congress was looking for a quick fix to a long term problem — and one which didn’t work because it didn’t raise the money that the budgeters anticipated it would do.”

FCC Chairman Reed Hundt labeled spectrum auctions a “business foreclosure law which masquerades as a budget or revenue-raising law.” Such laws, Hundt said, hurt competition by limiting the number of new businesses which can enter the marketplace. “All you are doing by limiting licenses is decreasing tickets to ride the information highway,” Hundt said.

FCC Chairman Hundt also indicated his preference that the government not set standards for digital television. It is best left to the marketplace to determine that, he said. Hundt also urged computer and communications companies to become intimately involved in the multi-billion dollar effort to wire the Nation’s classrooms. Hundt characterized the transition as the “largest national education effort since school lunches” and a significant business opportunity because schools will spend some twenty billion dollars in the next five years to convert public schools to the information age.

CCIA’s annual Washington Caucus attracts leading policymakers both from Capitol Hill and from the Administration. This year’s Caucus included discussion on the federal budget and taxes, campaign finance reform, encryption policy, copyright and procurement law reforms, antitrust law and Year 2000.

CCIA is an association of computer and communications industry firms, as represented by their most senior executives. Small, medium and large in size, these companies represent a broad, cross-section of the industry, employing over a half million workers and generating annual revenues beyond 200 billion dollars.

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CCIA is an international not-for-profit membership organization dedicated to innovation and enhancing society’s access to information and communications. CCIA promotes open markets, open systems, open networks and full, fair and open competition in the computer, telecommunications and Internet industries.